Ryanair, one of the most famous low cost airlines, attracts attentions from people and researchers all over the world. As the financial crisis and the European debt crisis have an obvious negative influence on the global economy, the aircraft industry has experienced some decline for the last few years. However, both the sales and profits of Ryanair have increased during this period.
In this essay, we will first analyse the external environment of Ryanair by using PESTEL Analysis Model. Then we will make an in-depth analysis about its strategic capability by SWOT model (strengths, weaknesses, opportunities and threats). In the following part, we will compare Ryanair with its biggest competitor easyJet and critically access the effectiveness of its cost focus strategy. Finally we will give a conclusion of the whole result of our research and give some suggestions for its future development.
Ryanair was first established in 1985 by Christy Ryan, Tony Ryan and Liam Lonergan. Its headquarters are located in Ireland, while its primary operational bases are at London Stansted Airports and Dublin. In 1989, Ryanair’s businesses saw a decline. At the same time, Tony Ryan persuaded his financial advisor to assume the CEO. Then, Ryanair began to learn experience from Southwest Airline, and was the first one to introduce the cheap air carriers and mode into Europe. Profitability of consecutive years has made Ryanair to become the most profitable airlines in the world.
Findings and Analysis
PESTEL Model is used in this report to give an overview of the six different environmental factors that the company has to take into consideration.
Firstly, political factors refer to the political organizations and relevant policies, laws, regulations as well as other factors which have the actual and potential impacts on operating activities (Gillespie, 2007). The charge which was raised by airports of different countries has a significant effect on Ryanair. Indirectly, Ryanair is also insubstantial to extra charges and taxes, for instance, the €10 tourist tax imposed by the Irish government. In addition, EU imposed a regulation on 17 February 2005, which asked airlines to provide standardized and immediate assistance for passengers who stayed at EU airports for delays, cancellations and denied boarding. This regulation led Ryanair to raise at least €200 million in their budget every year. (O’Higgins, 2011)
Secondly, economic factors mean the organization's external economic structure, industrial layout, resource situation, the level of economic development and future economic trends (Gillespie, 2007). There are two interrelated economic factors that affect Ryanair. The first one is the recession of 2008/09. It created adverse economic situations such as high unemployment rates and severe credit crisis, which lead to the leisure spending and business passengers declining. Ryanair's planned passenger volume growth has been restricted by this depression. Moreover, the continuing growth of fuel price is the greatest concern to this company. It is hard to control and predict the wide fluctuations of Jet fuel price and its increase demand. According to Pearce (2011, 3), “However, the developed economies have seen a much slower recovery and levels of output, income and spending remain well below pre-recession levels”.
Thirdly, social factor refers to the historical development, cultural traditions, values, education levels, as well as customs and other factors of society where the organization belongs to (Gillespie, 2007). It can be found in Ryanair's own report (2012) that Ryanair as well as other airlines are facing some social changes--threats from terrorist attacks, the continuing acceptance of the security budget suppliers and more price-sensitive business travelers. These factors make up the social factors which affect Ryanair and aviation industry.